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We don’t want our work, from a diversity, equity, inclusion standpoint, to be a marketing ploy. We want to make sure that in the day to day, we’re also thinking about it, and we’re acting on it. And so it’s a day to day relationship. And so, I would say, you know, you can’t really programatize all of that because you have to build relationships with people and be in the trenches with them. And that’s really, I think, the hard work that we do.
Jay Clouse 0:24
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to Upside.
Jay Clouse 0:51
Hello, hello, hello, and welcome to the Upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co host, Mr. 10x-co-host himself, Eric Hornung.
Eric Hornung 1:04
Are you referring to that meme that went around, like, a few weeks ago?
Jay Clouse 1:08
I am because I think that you are much more in tune with what it means than I am; I don’t even understand what they’re talking about. I don’t know if I gave you a compliment or not just now. So enlighten me.
Eric Hornung 1:18
So the 10-x meme kind of came from this thread that someone started to say, Hey, what are you supposed to look for in a 10x engineer, and it was someone who does all these things really well but like, isn’t a team player isn’t good at teaching people stuff, doesn’t care about the office politics, works erratic hours. This is what you want to look forward in a 10x engineer, and all of Twitter just like dunked on it. So everyone was putting out, what is the 10x VC? What is a 10x dog? What is, like, all this stuff, like making fun of the thread about 10 x VCs hate meetings and all this. So calling me a 10x co host — I think the underlying intention was good. I think what you actually did, though, was make fun of me.
Jay Clouse 2:01
So, you’re saying somebody intended to actually say this is what a 10 engineer is, and then kind of described what is really the opposite of that?
Eric Hornung 2:09
No, I think they were describing something that is probably true. I think it was the, based on what everything I’ve read on Twitter, it was everyone’s dunking on it because it was read as more of a how-to manual, like how to find these 10x engineers. But it just came across as like very hustle corny. But I think it reflects a reality in the VC, specifically, San Francisco Silicon Valley space of like the people that get paid the most and do the most and the kind of people that people are looking for. Someone pulled up a quote by Steve Jobs, and like, underlined all of the adjectives that were used in the 10x rant with like Steve Jobs’s response to something else, and how they like matched perfectly with the kind of talent Steve Jobs was looking for. And then someone else, like, quoted another thing, and was like, look at the comments in this one versus the comments in this ‘how to find a 10x engineer.’ And it just really shows that you can say the same thing on Twitter a different way, and just get absolutely owned. But you could say it a different way and just get tons of praise.
Jay Clouse 3:13
Interesting. And this is why I don’t participate in memes because I don’t really get them most of the time. I’m not even sure I fully understand what the phrase “dunked on” means, other than I think it’s another excuse for you to remind me that you used to be able to dunk a basketball.
Eric Hornung 3:24
I think that’s exactly what I do. I often bring up basketball metaphors and references just so that you remember that I used to be able to dunk a basketball. I’m that nostalgic and retroactively narcissistic.
Jay Clouse 3:39
Well, speaking of basketball, today, we’re speaking with Molly Demarest, General Manager of American Underground, which is based in the Research Triangle of Durham, Raleigh and Chapel Hill where, we know, there’s lots of basketball happening, or at least I think there’s lots of basketball happening.
Eric Hornung 3:54
Do you actually know if there’s basketball happening there, Jay?
Jay Clouse 3:57
Can you confirm if there’s basketball happening in the Durham-Raleigh-Chapel Hill area?
Eric Hornung 4:01
I would assume with Duke and UNC in that area, there’s a lot of basketball always happening.
Jay Clouse 4:07
In 2010, American Underground launched on the historic American Tobacco campus. Today, American Underground connects hundreds of Triangle startups to the region’s resources, thought leaders, talent, media, and entrepreneurial support systems. So this is another one of our innovation or tech-hubs in a different community that we’ve had zero experience in so far.
Eric Hornung 4:28
Yeah, we’ve dove down south. We saw Florida; we talked to Memphis, Tennessee; we’ve gotten into New York a little bit, the Northeast, the Midwest, but we’ve kind of stayed away from the Carolinas and Virginia. What do we call it, the mid-Atlantic? Is that what that’s called? Or is that the South? I don’t really know.
Jay Clouse 4:48
I don’t know. I’m not even gonna make a guess. I’m going to let the folks on Twitter let us know if that is true or not. If you guys think it’s called the mid-Atlantic, tweet at us @upsidefm and let us know that we’re doing it right or we’re doing it wrong. Or you can email us firstname.lastname@example.org if you have something to educate us with. Let’s get into that interview with Molly right now.
Eric Hornung 5:07
Jay, if we were going to give out executive titles for Upside, which one of us would get CEO?
Jay Clouse 5:12
Eric Hornung 5:13
That was so quick. You didn’t even, like, contemplate me being CEO.
Jay Clouse 5:16
Eric Hornung 5:17
What would I get?
Jay Clouse 5:19
Eric Hornung 5:22
Not co-producer. I don’t think that’s in the executive category. So if I was hiring for an executive position, I probably wouldn’t look for co-producer in that bucket, huh?
Jay Clouse 5:32
How would you go about hiring for an executive position?
Eric Hornung 5:34
I mean, that’s easy. I go to our friends at Integrity Power Search. They’re the number one, full stack, high growth, startup recruiting firm based between the coasts. They partner with venture capitalists, private equity groups, and CEOs to build amazing teams for the world’s most disruptive companies. I mean, since 2012, they’ve successfully executed over 600 searches, and they’re on track for 200 more just in 2019. Their clients have raised collectively over 2.5 billion in venture capital and counting,
Jay Clouse 6:03
You’re not trying to replace me as a CEO, are you?
Eric Hornung 6:05
I didn’t know you actually got the title. I thought this was just a hypothetical.
Jay Clouse 6:08
Nope, it sounds like we’ve made a decision, we’ve come to a consensus. So, if you guys are looking to talk to the CEO of Upside, you can talk to me, and if you’re looking to hire your own executive help, you can go to Integrity Power Search at upside.fm/integrity to find out more about how they can help you.
Jay Clouse 6:31
Molly, welcome to the show.
Molly Demarest 6:32
Thank you. I’m happy to be here.
Eric Hornung 6:34
On upside, we like to start with a background of the guests. So can you tell us about the history of Molly?
Molly Demarest 6:40
History of Molly. Oh, what a complex question. So I have grown up in Durham, North Carolina. I am the oldest of four in my family, four kids. Really close to my siblings. Majored in accounting and undergrad, which was a great experience and knowledge but quickly realized that was not going to be my cup of tea long term. I – let’s see, for fun, what do I do? I like to box, golf hike — big hiker– cook when I have time. And I really like Durham Conniption Gin, pretty fabulous if you haven’t had it.
Jay Clouse 7:15
I’m a big gin guy. Yes. And I have not had that. So I’ll have to add it to my list.
Molly Demarest 7:20
It’s won a ton of awards. And I mean, I’m a little bit biased because it’s from the area. But I think it should be a classification all in itself. I think it should just be called conniption. You have gin, you have vodka, you have conniption, in my opinion.
Eric Hornung 7:32
What’s different about it?
Molly Demarest 7:33
It’s magical. I don’t really know. I don’t know enough about how it’s made. It just somehow disappears when you’re drinking it. But it then add so much flavor. I’m not quite sure. But it’s pretty amazing for a summer drink?
Eric Hornung 7:50
I don’t like gin. But after calling something magical, I am going to have to try it next time down in the area.
Molly Demarest 7:57
You should, you should do yourself a favor.
Eric Hornung 8:00
When you graduated, did you go Big Four? Is that when you realized accounting wasn’t for you? Or which direction did you take this accounting degree?
Molly Demarest 8:07
So, I did a public — I did an audit internship in a regional firm my senior year in college. And it was kind of interesting. I mean, I learned a lot. But one of my big challenges was through college, I worked for a criminal defense firm in North Carolina. And they focused a lot on the death penalty and the Racial Justice Act. And essentially, the Racial Justice Act allows people to appeal their death penalty sentencing based on race. And as we know, there are so many systemic issues from a race standpoint, all over the board, but especially in the legal system. This really started bringing to light a lot of the injustices. And so some of the work that I did was on a couple different cases. But one of the projects that I did was exploring all the murders in Durham, over five year span and analyzing the race of the defendant and the victim and the rate at, you know, what, essentially their, like, sentencing process. And that really exposed me to, I mean, when you’re touching these pieces of paper that you can’t deny what a what a jury or, you know, what a district attorney is writing on there, and you see certain things, and then you look at the process, it’s like, whoa, I mean, there’s no denying that the inequity is there. And so I had been through that experience. And I worked specifically on the death penalty case, as well, and — in addition to that case, that other research case — and then I’m doing accounting, and I’m like, what the hell am I doing here? I have a hard time sitting here auditing cash when there are these other issues going on. And so I graduated really feeling this tension between accounting and this whole other world. But I knew accounting would open some doors for me, and it clicked in my head. So I decided not to go the Big Four route. I did have all the credits I needed to sit through the CPA exam. And I actually sat for it, had three of the four, missed the fourth by a point. And then it kind of had me at this point of like, why am I doing this? I’m just kind of following this path, it’s not really what I want to be doing. So I put it to rest. And that was the best decision I could have made. Right out of school, I joined Fleet Feet Sports, their corporate headquarters is here in the Triangle, and it’s a specialty running retail franchise. And they have a program called CF on a Box. And so I worked with individual franchisees across the country to look holistically at their business and how they were running it, hitting sales goals, was it an environment where their employees wanted to grow. And then the most fun aspect of it was, how do they best engage with the community. So the consistent experience with Fleet Feet is the customer service, but you want it to reflect the community. And then I found myself with the Underground and joined the American Underground six years ago as the second employee, and I was hired to scale the operations and finance side. And on my first day, my boss then and now Adam Klein — so he’s no longer in the role, essentially I’ve taken his role — said, you know, Mol, I want you to know that at the end of all this, if we’ve only helped people that look like us, we haven’t done anything, and we’re not there to be a savior, but we need to think very intentionally about the systems and our approach to make sure that we’re building as much of an inclusive ecosystem as possible.
Jay Clouse 11:24
I want to get into American Underground here soon, obviously. But kind of a precursor you mentioned, you know, you were doing this analyzing of these different cases, and you’re seeing systemic issues of injustice and realizing that you have a personal interest in being involved in reversing that. When you discovered that, how did you keep yourself from being completely overwhelmed with that fact, in figuring out where you could actually engage and put your time in meaningfully?
Molly Demarest 11:54
I really wrestled with that. And I’d be lying if I said I wasn’t still. It was a little more complex for me too, because I actually had a first cousin that was murdered. And so, I think I was very aware of, like, what our family’s experience looked like in parallel to that. And so I just, there were so many aspects that I was thinking about it. But when I looked at it, you know, whether you believe in the death penalty or not, like that’s, that’s not really the point of this. But the point is, is it a fair and equitable process? And so I think where I really started finding my interest and focus is, how do you build systems that have enough input from different perspectives, and then there’s accountability there, so that people of all different backgrounds can access and then thrive within it. And so I think that’s kind of how that experience and then my passion has evolved. And so when I think about running, you know, the American Underground as an organization in this season, I want to make sure that the things that we’re doing are considering those different factors, and they have a really solid foundation.
Eric Hornung 12:56
When you joined American Underground six years ago, what was it? What was its mission and vision, and how has that changed in the last six years?
Molly Demarest 13:06
So when we started, the first couple years, it was just actually run by the community. There were no employees. So we are owned by a broadcasting company locally, fourth generation. Kind of long story short, they bought the Durham Bulls, first night of the Bulls, there were 35 car break-ins, bought American Tobacco, which is now the state’s largest historic renovation project. And out of that came American Underground, in the basement at American Tobacco, hence the name. And the philosophy around it was really meeting or responding to the needs of the community. So they wanted — “they” being the founders — wanted a place to work that they could afford, given the unpredictable aspects of their companies, but also be around each other. And so for the first couple years, it was just led by the community. And then Adam Klein came on, and we really started looking at it from an economic development lens. His background is economic development. So again, thinking long term job creation, who’s accessing these things, skills. So that was kind of the initial foundation, was using real estate to build density. And then we’ve evolved it based on the needs of the community. So, then we had one to four person teams. Today, we have that and the 75 person team. And we work with 100-plus person teams. So we kind of essentially evolved our offerings to be able to scale with the companies.
Jay Clouse 14:29
Why did a media organization care about this, or care about economic development?
Molly Demarest 14:34
You know, I, a lot of times people don’t believe me when I say this. But this family really lives out, the Goodman family, giving to the community and believing in the community. And often there’s a lot that they do that people have no idea that they are part of. I’ll never forget my first finance meeting. So my job was running ops and finance. And I come in there with, like, my balance sheet and my p&l. And Michael, one of the son’s, was like, I don’t really care about that. Like, I want to know, who are the people that are coming through the doors? What are they needing? What kinds of companies are they building? What are their ambitions? That other stuff will come. And I think that’s a really interesting approach, because they get the long term investment in community, it’s not a quick, like, get, let me get a quick return and then get out. And so that’s been the the value from the beginning. But when I think about what we do well, as a broadcasting company, is build audiences. And when I think about our role as the American Underground, we really are building audiences for our companies. We’re helping them get in front of talent, we’re helping them get in front of investors, customers, and we can leverage the American Underground brand to help push them forward and really elevate them and their voice. So that, I really do see that we’re just kind of a new evolution of audience development in a way.
Jay Clouse 15:48
How do you describe American Underground today, then?
Molly Demarest 15:51
We — American Underground today, I think my response there is, wow, like we have evolved so much. And I would say we’re a living breathing organism that is constantly responding to the needs of these high growth companies. Our job is to be a couple steps ahead of them and make sure that we’re thinking ahead for what they need, and they’re the ones that are disrupting industries. So at the end of the day, we are in the connections business. Our job is to help our companies connect to customers, investors, employees, and other resources they need to grow their business. In terms of who we are, we support companies, so through workspace, through content and programming, through connections, and… we are Google for Startups Tech Hub.
Jay Clouse 16:39
How would you…So I’m going to take the devil’s advocate here, and don’t hate me for this. If someone came to you, and they said, so let’s say you described that and they said, oh, so you’re a co-working space? How would you agree or disagree with that?
Molly Demarest 16:53
Yeah, we get that question all the time. I would say, yes, we provide that as a resource to companies as one of the ways we support them. And the kinds of companies we work with are companies that are building a product or on the pathway to product at scale. So we define product as consumer packaged goods, software solution, medical device, anything that you can sell. And then scale is, do they have the mindset to grow beyond 50 employees, beyond a million in revenue, and/or could raise some sort of funding? So we’re very focused on a specific kind of company. We’re honest, we don’t do everything well, I don’t think you can. So I think traditional co-working spaces tend to be open to anybody and everyone. And what they provide in their solution is space. We are focused on high-growth companies, and space is and aspect of what we provide them, in addition to a lot of other things.
Eric Hornung 17:45
So that, at heart, you guys are connectors. How big is your connection or impact footprint? Like, is it really clustered in the Raleigh-Durham area? Or does it expand?
Molly Demarest 17:57
So I wish I was like, I could just make super calculations in my head. But when I think about our network, I think about the — so, let’s say our community is 15,000 people. So on the space side, maybe we have 1,000 people coming through our doors on a daily basis. And then you expand that to the broader audience in the region, investors, other mentors and advisors, other employees that work for some of these larger tech companies. And then I think about the magnitude of their networks. Our focus and priority is to figure out how to get the information to enough of the right people so that they can leverage their networks for the community. So it’s really not about, hey, we’re an 11 person team, and you’re confined to the people that we know. This is a national and global network that you have access to right when you join the community because you can access all these people. And oftentimes, founders will say, one of the most valuable parts of being a part of the American Underground is the listserv, which seems kind of weird to say But here’s the thing, you are looking to hire a CTO, and you have the ability, as a founder, to send that out to everybody in our network without any barriers for that. And so, then think about the magnitude of the network that they bring. And over 30% of our companies have found employees, just in the past year, just from that specific vehicle.
Jay Clouse 19:24
So it sounds like a huge part of the charter here is economic development and building up the community. And so with the companies that you choose to bring into the space, is that because that’s what you believe can make that change the fastest? Or does American Underground have, like an investment arm to it?
Molly Demarest 19:42
So we do not take investment in the companies when they join. And I actually really appreciate that, we made that decision in the beginning, because it really allows us to be more peers and partners with the founders. And like we’re not, it’s not mixed up. Sometimes that can get pretty gray. We have have invested in a few specific companies in the region through, you know, our parent company. But that is not our primary focus here.
Jay Clouse 20:08
And so, I’m interested to hear — and a lot of these questions honestly come from Eric and I, you know, talking to different versions of economic development in different areas of the country — is American underground a nonprofit, or what is the model behind it?
Molly Demarest 20:22
Yeah, we get that too. So we, I often say we are a for-profit entity that is not in it for-profit. So the for-profit entity piece allows us to move and respond really quickly to the needs of the community. And essentially, you know, we could have a conversation today about something we want to do. And if we get enough buy in from founders, and we think it’s the right move, we can move on it tomorrow. So that’s one of the benefits of that. And when I say we’re not in it for-profit, we are in it to run a sustainable organization. But the purpose and our charge is not to generate, you know, a huge cash cow for our parent company. I think they also see American Underground as kind of a feeding the region, one avenue for feeding the region of new ideas and and new jobs. You know, you can’t necessarily measure the impact today. But the impact on that down the line is a lot greater.
Eric Hornung 21:17
When I think of Raleigh-Durham, I think of the Research Triangle. And here’s a little fun fact, I have no idea what that actually means. But I know that it’s a buzzword I’m supposed to know. So what does being in the Research Triangle mean for American Underground in terms of the types of companies that are involved?
Jay Clouse 21:36
Also, maybe qualify that with, what is the Research Triangle?
Eric Hornung 21:40
I was hoping you’d get to that because I was hoping to learn.
Molly Demarest 21:42
This is hilarious. This is actually really big debate often. So you have a lot of different camps. You have the people that want to say they’re just from Durham, or they’re just focused on Durham, just Raleigh, just Chapel Hill, just Apex, just Cary, you know, you’re, like, hometown team. Then there’s the, is it Raleigh Durham? So that’s there’s this whole debate about, well, that’s the airport. So are we going to call ourselves the airport, that sounds kind of weird. And then there’s — this is not my opinion of how it sounds, I’m just giving you a sense of what people say. And then there’s the Triangle, which is really, the anchor points in there are Raleigh, Durham and Chapel Hill. And then there’s other counties kind of within and on the outskirts of that. And then there’s the Research Triangle Park, which is within the middle of Raleigh, Durham and Chapel Hill, which is its own area. And that’s where you have Glaxo, IBM, Cisco, Lenovo, and kind of a whole different development within there. So it’s kind of kind of awkward. We tend to lean towards the triangle, because it’s much more encompassing. That tends to be the word, the language that we use. And there’s a group called the Research Triangle Regional Partnership. And I think this actually embodies a lot of what this region represents. It essentially, is an organization that acts on behalf of 16 different counties in the triangle, and different economic development groups. And they are essentially marketing the region and trying to make it easier for outside groups to enter in and get a full scope of the landscape. I’m actually on the board of this organization, we partner very closely with them. So when I think about our focus with the American Underground, we want to be able to leverage an accurate the voice of these high growth companies in the Triangle region, which encompasses all of that. Now, traditionally, real estate was the primary way that a company could engage with the American Underground community. But what we’ve just launched in the past month and a half is a virtual membership, which allows companies to have a profile, post jobs, engage in all the community and peer groups, regardless of if they need space. Pay For Connect is a great example of this, they’ve just raised another significant round of funding, they’re based in Raleigh. They want to be a part of the American underground community with all the other founders and employees, and they don’t need space. So space should not be a determining factor for whether or not they want to participate. So that, this kind of virtual membership and the software side has allowed us to scale much more regionally than we could have before.
Jay Clouse 24:06
And is space the way that American Underground has generated the profits that make it sustainable?
Molly Demarest 24:12
Yeah, our primary business model historically has been through real estate. And we’ve had really great partners. So Self-Help Credit Union is one of, they own two of the buildings that our main building that we’re in, and they get what we’re doing. And so, we’ve had to find, you know, our goal has been to find partners that understand it. And then our job as a team is to operate it and run it in a way that can have startup affordable rate, the allow them to scale. So we’re going to be much more cost effective and flexible than you’ll find with a lot of other, you know, if we’re just talking space, then a we work, for example.
Jay Clouse 24:48
So you have multiple locations, how many locations do you have?
Molly Demarest 24:51
We have five.
Eric Hornung 24:53
If I’m going to start a company in the triangle, what type of company has the best chance of success?
Molly Demarest 25:00
We see a lot of b2b software. So I think, also, when you look at the corporate landscape with, you know, IBM, Lenovo, Cisco, that’s a lot of what you find here. I think a lot of the talent that comes out of those companies, they have experience in those areas. A pretty strong life science biotech industry here as well, I think that’s still, you know, still early on, and we don’t focus as much, the American Underground specifically doesn’t focus as much on companies in that space, there’s a lot more complexity to those kinds of companies. But I would say primarily b2b software, some consumer packaged goods.
Eric Hornung 25:37
How does the investment landscape look locally? Like are there b2b, SAS, and bio-science specific investors? Or is this money kind of coming from outside of the region?
Molly Demarest 25:50
I would say it’s a little bit of both. A lot of the funds locally, Bull City Venture Partners, Idea Fund Partners, Cofounders Capital. They’re diversified, but they definitely probably have a leaning more towards the b2b space. In terms of investment as a whole and where companies are getting it from, yeah, there’s definitely a lot out of market. Though, I will say, one shift we’re seeing a lot of is companies focusing on customers and revenue. And Archive Social’s a great example of this. They just announced in May a 53 million growth equity investment round. And they took very minimal investment in the beginning. David Gardner, that’s one of the partners at Cofounders Capital, was in that, they were also in the Startup Factory which was an accelerator that was in the Underground with their first fund. And he grew and Neil, I mean, they were focused, and they grew a really strong business, which allowed them to raise a different kind of equity and funding round than a normal VC round. And we’re seeing a lot of that. Companies focus so much on customers, it’s like, give me a customer, then an investor, and I want to be here to raise my family, grow a healthy company, recruit talent. And so it’s just a much more holistic approach.
Eric Hornung 27:10
Customers are the best investors, I guess.
Molly Demarest 27:13
Jay Clouse 27:13
What does it mean to be a Google for Startups Tech Hub?
Molly Demarest 27:16
So I think early on, so I guess we’ve been a Google for Startups Tech Hub for about six years. And the initial, I think, purpose of it is that Google said, hey, there are these communities that we’re a part of, or want to be a part of, we see an opportunity from a, I would say, entrepreneurship, job creation standpoint, in communities outside of New York, Silicon Valley in Boston; let’s see what it looks like to bring them together and essentially acknowledge us as an industry. So they selected, I mean, they had an interview process at each of the markets that they’re in. And then what that looks like today is really an aggregate of resources for companies and a network for our team, to be honest. So, I think Google got it ahead and said, hey, entrepreneurs-support organizations are an industry in themselves, and they will continue to grow. So we’re going to find the leaders in those regions, and we’re going to bring them together once a year on a national level. So a month ago, I was in Detroit with all the leaders from North and South America learning about what are they working on in their ecosystems? What are their challenges? How can we work together with each other on different things? And then once a year, they bring all the leaders from across the world together, which is such a powerful time, because you’re hearing from founders in South Korea and Ghana, and understanding what is their entrepreneurial landscape, what’s their political climate, and being able to make more connections globally. And then there’s been things like Google Demo Day, where we’ve been able to send one founder from each of the regions out to San Francisco to pitch. And American Underground companies have actually won two of the four, which has been pretty fun. But they’re really here just to help us do what we do well. We also run a Black Founders Exchange program. And this will be our fourth year running it in September. Google has been our primary funder of this. They’ve been tremendous partners. So not only financial contribution, but they tap their whole Google network to bring the best experts to help these companies with this week-long immersion program.
Eric Hornung 29:24
You mentioned earlier, when you joined American Underground, that your boss said, if we only succeeded helping people like us, we failed. You just also mentioned this Black Founders Exchange, what other programs do you have in place to help people who don’t look like you?
Molly Demarest 29:38
So, we are kind of looking at in a lot of different angles. I think Black Founders Exchange is the primary one that we do. Also, if you look at the history of Durham, black entrepreneurship is core in the soil. So, in the early 1900s, there are more black millionaires per capita than anywhere in the country. And so, it’s kind of part of the community and the culture. And so there are a lot of on our team in the community that are part of leading this program. It’s not just me. We partner with groups like Code the Dream. Code the Dream started initially to support, I would say, provide skill-development opportunities for the immigrant and refugee community. And what that’s evolved into is an education program and then a jobs program, where the students come out of that, they’re able to intern, get internships, building products, on real businesses, and they get paid to do it. And that launched in the Undergrad, I think it was about five years ago. So that supports a large audience in the region, also touching some of the rural communities. I would say, community partnerships are another big aspect of that. And then, I would just say the day-to-day, thinking about how are we supporting founders in the day-to-day to get access to the things that they need and not just doing it through space. And so, something we’re cognizant of is not, we don’t want to just focus on this from, like, a marketing…We don’t want our work, from a diversity, equity, inclusion standpoint, to be a marketing ploy. We want to make sure that in the day-to-day, we’re also thinking about it, and we’re acting on it. And so it’s a day-to-day relationship. And so I would say, you know, you can’t really programatise all of that, because you have to build relationships with people and be in the trenches with them, and that’s really, I think, the hard work that we do.
Eric Hornung 31:24
So many of the cities we talk to are rooted in their pasts, and those are usually very specific past. So I’m from Cleveland, which is just a past of, you know, being a mistake on the lake, all that kind of stuff, and trying to grab their future. How much of the culture in the Triangle is kind of rooted in this kind of old money, south tobacconist, American Tobacco, RJ Reynolds, or JR Reynolds, or whatever it’s called, how much is rooted in that?
Molly Demarest 31:52
And I mean, I’d be curious, it’s a really good question. I’d be interested to see what other people think about it. I feel like what, when I think about what the culture is like here, there’s a, kind of this like, we’ve overcome something. So there’s a, there’s a little bit element of, I think specifically in Durham, that we’ve overcome this kind of resurgence from, you know, tobacco to tech. I mean, it’s not just tech, but so it’s kind of like an overcoming feeling. I think there’s also this vibe of, come and be who you are, as you are. And so, in the growth, what people really care about preserving and maintaining is the freedom to be themselves. And not to have to have a facade on, not to be, you know, behind the mask, act like, you know, you’re only worth something if you have a certain degree, or you know somebody, which I think, in some communities, it’s very much like that. And so, when I think about the culture and ethos of this community, the thing that people are fighting for is the freedom to be themselves and to grow authentically. I think that’s also just the history of this region. I also think, you know, the research institutions that we have here, specifically with Duke, UNC, and Carolina, also drive kind of a mindset of creativity and innovation that, just by default, comes out of research institutions. So there’s a little bit of that sprinkled in there. And then a high, you know, very high concentration of creative class. So you get a lot of people that are not only innovators in, you know, maybe at the technology space, but they’re also creative in other ways. Like, do you know what a mellophone is? Me neither. I still probably couldn’t repeat back to what it is. But I learned recently that four members of the American Underground community play the mellophone. We were in a room of, like, 50 people and four of those people play the mellophone. This is my point. They’re incredibly complex, creative people who have a lot of factors to they are, and people don’t want to lose that.
Eric Hornung 33:47
Do you have a basketball alliance?
Molly Demarest 33:50
So, I have to kill you. [Laughs] I…the whole reason my family moved to Durham when I was a young kid was for Duke. And most of my upbringing has been in the Duke community, through the Duke Health Care System, most of my friends were all connected to do Duke, being in Durham. So I would say I’m very partial towards Duke. I had my high school graduation in Cameron Indoor Stadium. I do think it’s kind of a prettier blue. And I don’t hate Carolina, and I kind of feel indifferent about NC State, from a basketball standpoint.
Eric Hornung 34:25
Sorry, I had to make you make some enemies on this one. You’re doing too good of a job.
Molly Demarest 34:28
That’s so funny. I was, I have been to a couple of Duke-UNC games at Cameron. And I’m used to, you know, high schoolers follow Duke students around, so we knew where, like, J.J. Redick would go to Taco Bell. And…sorry, JJ.
Jay Clouse 34:47
J.J. is a big fan of the podcast. So…
Molly Demarest 34:50
Oh. Come to Durham!
Jay Clouse 34:52
So, you have on the homepage of your website, 31% of the companies in AU are female lead, 30% of companies are led by a person of color, obviously, higher percentages, even better, but a lot of communities we talk to don’t have even, you know, 30% for either of those communities. And sometimes they’ll talk about a pipeline issue. So, for your community, do you think that, one, the pipeline issue is a myth? Or two, have you taken any type of intentional steps to create a stronger pipeline for women and minorities?
Molly Demarest 35:26
Yeah, I mean, this is such a complex, such a complex issue. So early on, when we looked at saying, how can we build the most equitable environment for a growing startup ecosystem, what we, kind of our hypothesis in the beginning was, the hiring trends would follow leadership. So if we focused on getting more underrepresented or misrepresented founders in the community, then the hiring trends would follow. So we do look at kind of both elements of that. And we started seeing that for sure, that the more the leadership was a representative, then the hiring trends started looking differently. Employees were staying, growing in their roles. I don’t buy…well, there’s an aspect of, I don’t buy that it’s a pipeline issue. Because I do think that our founders, in a lot of places, and I think a lot of times, they’re not where you think that they are. Or, no one said, hey, welcome in, like, this place is for you. And so, there have been multiple conversations we’ve had with a few women of color that have started companies, that have been growing their businesses with very strong revenue, have a very scalable model, and they’ve been working at home because they weren’t really sure where to go, and they weren’t really sure they were going to be welcomed in that environment. And so we think about that in terms of what is the vibe when you walk in? Do you feel welcome? Do you feel, like, just the maneuvering through our space, or when you show up at an event, doesn’t seem like a place that is for you? So we look at that a lot on the teams. And we actually were just talking about this, I’m not kidding you, like about an hour ago, I was talking with Justin on our team, and we were just talking about, what is this? Like, you do see less ideas being generated right now, I think some of that’s from an economic standpoint, it’ll be interesting to see kind of what happens in the next couple of years, like, if we will go into a recession. But, you know, who are the people that are being able to work on their companies during the day? There are certain founders that are only able to work on them at night because of wherever they might be from a financial standpoint. I’m not saying that’s only founders of color or only women. But these are the kinds of things that we also have to ask. When we host events, are we doing them in the evenings all the time? That can be really hard for parents, especially for women. So we actually do most of our events around 4pm so that parents can come to that, and we see more women participate. I don’t know if I answered your question.
Jay Clouse 37:57
Well, I don’t know that there is an exact answer to the question, right? You know, you answered it in so far as, I wanted to see how you were thinking about it, because it seems like you’re making some real strides that other people in different communities could benefit from. And so, to that end, who are some of the peer organizations that you look to, to learn from?
Molly Demarest 38:15
You know, I think sometimes we just want to look around to the people that we work with and say…I had a conversation with a founder last week, and I, I just was like, do you feel welcomed here? Do you feel like this is a place that you can grow your company, and do your employees feel that way? So sometimes, I think it can be easy just to look at other organizations and other places and totally miss just the people in front of you. And you know, I think about that with our team too: is our team representative of the people in the community and the people that we want to serve? So part of this is just looking and having a relationship, again, with the people that were around day-to-day to make sure that we’re responding to their needs, and that we’re journeying with them and then with us. From an organization standpoint, I think the Google for Startups Network has been really helpful for us. And, you know, I think about Grand Circus, and Detroit, Nashville, the National Entrepreneur Center in Nashville, 1871 in Chicago. When we’re together, we talk very deeply about these things. And it’s helpful to hear all the nuances within the communities about what is or isn’t working well there. Every community is different. But I think in general, I don’t want to lose sight of just seeing the people for who they are in our space. And I think that that is really the key to shifting a community.
Jay Clouse 39:33
Who are some of those companies in your space that, for those of us who are not in the region, we should keep an eye on or you think that we might see their names?
Molly Demarest 39:39
So, I’m just gonna like, name a bunch of people that I think, and then you guys can all go look them up. Ivana and Gabby, a wife and wife team, Fathom May I, should check them out. LoanWell, Bernard Worthy, also one of our Black Founders Exchange Alumni and based in the American Underground. I would say Harold Hughes, who’s also an Exchange Alumni, he’s based in Austin, actually, but stays very connected to this region. Bandwagon is his company. Leigh-Kathryn Bonner, Bee Downtown. They’ve scaled a bee-keeping model, which has been really interesting. Allison Wood, she was our CEO of the year last year, and her company is now called DaVinci Ed, they just went through a rebrand. Really proud of her and her team. you know, and I also think of groups like Workshop. So, Ben and Anna Adler, they started as a services company and looking at possibilities for expanding on the product side. So we also see a lot of those kinds of companies, and they work with, companies, like Google, are their customers. And so, you kind of see a breadth. We also have a company called IdeaBlock, which, met with them last week, this was really fascinating. So when you have an idea, the patent process is very cumbersome, long, and pricey, I think it’s like $60,000 a patent. And they have created a technology where, essentially you get a blockchain hashtag, or a hash, I called it a hashtag. You get a blockchain hash that essentially marks your idea. So right now, you know, we could just come up with an idea, and you could upload it, and it marks it as the non-negotiable point of reference for that specific idea. And we’re actually going to do a cool event coming up with that with our founders. I could keep going.
Jay Clouse 41:21
I think that’s plenty for us to look at. We’ve actually heard about Bee Downtown before from, I think the woman who connected us, Holly, was telling us about Bee Downtown.
Molly Demarest 41:29
Yeah, I’ve been, I actually, I don’t serve on a ton of…Actually, I don’t serve on many company boards. But I have been kind of mentoring Leigh-Kathryn, since she graduated from undergrad, she actually was an intern here years ago. So, I’m actually on her board and blown away at how she’s evolved what you would not think of as a scalable model into something that’s scalable.
Jay Clouse 41:51
You talked a lot about how at American Underground you think about inclusivity. Raleigh and Durham area as an ecosystem or as cities, how much of that is in the conversation there right now? Because I think of that area as a peer city to Columbus, where I’m seated right now. And it’s very much a topic of conversation all the time here.
Molly Demarest 42:12
So how does it show up in Raleigh or just between Raleigh and Durham?
Jay Clouse 42:15
I guess maybe a more eloquently phrased question: what’s going on in those cities more broadly, right now, in 2019?
Molly Demarest 42:22
Yeah, I mean, there’s so many, there’re so many levels to this. So, from an equity and inclusion standpoint, I think you have to ask yourself, are the opportunities being created out of these startup communities? We’re talking specifically startup communities accessible to people that live in those communities? It’s definitely, I’d be lying if I said that it is a 100%, accessible and completely equitable process. We know that’s not true. However, I do think that there’s a focus in the Triangle startup community, which includes Raleigh and Durham and Chapel Hill, and thinking about how can, what are the avenues for members of those communities to get the skills that they need to get the jobs? And also, how do we start working with the youth? And so there’s a big focus on youth and working with the public school system as well. So oftentimes, people say, how do we know if we’re successful? I don’t really know if we’re going to know for a while, but to me, I imagine a story where you have a middle schooler in one of the public school systems today that got exposed to a startup company, got the skills they needed because they were inspired, joined a company, got the work experience, started a company, created jobs, and kept going. So, but that’s like a 20-year timeline. And I think that that is definitely a philosophy, from a regional level. There are a lot of infrastructure challenges. And my hope is that, if we are all moving in a similar direction together, like one of our partners in Raleigh, HQ Raleigh, co-working is one of the ways that they support companies. We don’t see them as a competitor. In fact, I just saw their founders, like, 30 minutes ago. And we’re talking about how to partner better with them so that we can leverage what we’re good at, leverage essentially what we’re good at individual, and what each other is good at so that we can elevate the region.
Eric Hornung 44:06
Molly, this has been awesome. If people want to learn more about you or American Underground, where should they go?
Molly Demarest 44:13
Come visit us at AmericanUnderground.com. And you’ll see on the front page, it says, your front door to this triangle startup community. And we really mean that. We would love to hear from you. We are here to help connect you in whatever way possible. Specifically, if you’re interested in being a customer, an investor, or employee of one of the companies that we’re working with, we are so eager to get to know you and help connect you in the right ways. If you’re moving to the area, we also would love to welcome you. As it relates to me, you know, man, I was going to say Twitter, that’s probably the best way if you want to get to know me more, but I have this like love-hate relationship with social media, because I really want to be present in conversations, and I have all these ideas of things I want to post. Send me a tweet, we can connect, it’ll be great.
Eric Hornung 45:04
All right, Jay, we just spoke with Molly from American Underground, a new part of the country for us.
Jay Clouse 45:10
I like it. Add it to the forthcoming Upside tour, stopping in the Research Triangle, which I’m still a little unsure exactly what it is, but it sounds like a fun place to check out.
Eric Hornung 45:19
This upcoming Upside tour that we’ve been talking about for, I don’t know, 60 episodes now. If we actually do it, we’re gonna have to take off a full year of our life just to go around and see and meet all of the people that we need to see and meet on the Upside tour.
Jay Clouse 45:34
I think it would be fantastic shameless plug to our listeners, this is something I genuinely want to make happen. So if you want to help support us in an Upside tour, we would love to talk what organizations we may have some synergies with, to co-brand work this tour on, so, I don’t know, open to ideas, email us, email@example.com.
Eric Hornung 45:54
And if you’re a listener who has one of those old style VW bug vans, and would want to rent it to Jay and I so that we could travel around the country in it, that’s always been a dream of mine. so shameless ask right there.
Jay Clouse 46:06
Love it. So Eric, before this interview, the one thing I knew about this region came from two years ago at South by Southwest, when I somehow weaseled into a session with the US Conference of Mayors. And I got to spend the session pretending to be a futurist and working with Mayor Nancy McFarland of Raleigh. What I remember most from that interaction — and it was great, I mean, we had something, like, 20 different US mayors of major cities, being very open about the struggles their cities were having — and learned a lot about how much they need to consider a traffic congestion and how difficult that is, given how much the citizens of Raleigh love their trees.
Eric Hornung 46:47
I don’t understand.
Jay Clouse 46:49
They need to expand highways. But they can’t because they can’t take down trees. The people will not allow it.
Eric Hornung 46:56
It seems like this could be solved with public transportation.
Jay Clouse 46:59
Possibly, but a lot of public transportation is stuff like rapid bus transit, which needs another lane, which you’d have to clear trees for. Maybe juniper trees, which leads to some of this fantastic gin that Molly was talking about that I can’t wait to try.
Eric Hornung 47:13
Yeah, I don’t like gin, but I’m, I could go for a…what’s a gin drink that I would like if I don’t like tonic water? A gin and juice? Is that a thing?
Jay Clouse 47:23
Yeah, maybe. Negroni.
Eric Hornung 47:26
But that has Campari in it, right?
Jay Clouse 47:27
Eric Hornung 47:28
So, I think the Campari kind of outweighs the gin, for sure. Maybe a Roy Rogers. Does that have gin in it? That sounds good as gin in it.
Jay Clouse 47:36
Anything that ends in Collins. Let’s get to the interview here. What stuck out to you about this conversation with Molly?
Eric Hornung 47:43
It’s a unique setup, compared to the other ecosystems we’ve talked to. Almost always, it’s some form of investment in the actual companies, whether it’s equity-based or not. There’s usually some sort of incubator, accelerator component, or there’s a workforce training component. But this is an advertising, broadcasting media-based model, which is just completely different.
Jay Clouse 48:10
And their actual financial model is based a lot on real estate, which I wonder how transferable is to other communities. You know, you have two aspects here that stuck out to me, one being that this whole thing was started from basically a wealthy benefactor, it sounds like, getting it started, who has the right types of motivations and interests at heart. So that’s already, though, still a little difficult to find and repeat in other communities. But the fact that it’s a for-profit business that is sustainable through real estate, I also wonder what kind of opportunity exists there for other communities? Because that sounds like it might work. But it seems to me, from what I hear about things like co-working, difficult model to pull off in most cities.
Eric Hornung 48:54
Yeah, I think we probably could have asked more about what the co-working boom has looked like in the last two to three years in the Triangle, as I’m supposed to call it, the Triangle, because six years ago, I don’t feel like co-working was as big of a thing, so they probably had less competition. But if it’s anything like Denver, where we heard on an episode with Kate from Upslope, that it went from something like three co-working spaces almost five to six years ago to 144 this year. I wonder if that kind of trend happened in the Triangle as well.
Jay Clouse 49:31
I’m not sure. But it sounds like there are a lot of startups there in the American Underground space. They’ve raised 211 million dollars since 2014. I was surprised to hear that IBM, Cisco, Lenovo are all in that area. I didn’t know that. So there’s a lot of knowledge workers in that space. Sounds like some real opportunity for that region to birth some, she said b2b, SAS, some healthcare, some CPG, which I would have been interested to dive in a little bit deeper on. We only have so much time here, Eric, but sounds like a region worth exploring more and getting a company on the podcast from, whether it’s the American Underground space or at least the area.
Eric Hornung 50:08
I agree, I think we should bring a couple on.
Jay Clouse 50:10
Alright guys, so we’d love to hear your thoughts here on this episode with Molly of American Underground. You can tweet at us @upsidefm or email us firstname.lastname@example.org. And if you’re in the area, the area of the Triangle and you know of a good founder or you are a founder, you can also email us email@example.com. we’d love to hear more.
Debrief begins: 47:37
Molly Demarest is the General Manager of American Underground.
The American Underground is based in the Durham-Raleigh area in North Carolina and focuses on connecting startups and founders in the region with the different resources needed to help their companies flourish. A Durham native herself, Molly discusses the development of the American Underground since its start six years ago and how the American Underground has in turn helped develop its community.
The American Underground prides itself on their intention to help women and minority founders find their places in the startup landscape. Companies they work with include Bee Downtown, DaVinci Ed, LoanWell, and IdeaBlock.
- Ad: Improved methods to sourcing talent and finding new possible colleagues (5:07)
- Molly’s transition from accounting to community-based work (8:05)
- Initial foundation of the American Underground (13:05)
- Describing the American Underground today, including it’s investment approach and model (15:50)
- What is the Research Triangle? (21:15)
- Types of companies a part of the American Underground (24:50)
- What is means to be a Google for Startups Tech Hub (27:13)
- Women and minority focus and the pipeline issue (29:22)
- Companies of the AU to watch (39:30)
American Underground was founded 2010 and based in the Triangle of North Carolina.
This episode is sponsored by Integrity Power Search, the #1 full stack high growth startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups and CEOs to build amazing teams for the world’s most disrupting companies.
Learn more about or get in touch with Integrity Power Search: https://upside.fm/integrity